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ENERGY LEGISLATION (REGULATORY REFORM) BILL 2004

                                                   Energy Legislation (Regulatory Reform) Bill

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Victorian Legislation Parliamentary Documents




                                                               EXPLANATORY MEMORANDUM


                                                                                   General
                                                The Bill makes miscellaneous amendments to the Electricity Industry Act
                                                2000, the Gas Industry Act 2001, the Electricity Industry (Residual
                                                Provisions) Act 1993, the Electricity Safety Act 1998 and other Acts.
                                                The principal purpose of the proposed amendments is to further improve the
                                                operation and effectiveness of Victoria's energy legislation and facilitate the
                                                transition to nationally consistent regulation of energy markets, including to
                                                repeal or update provisions no longer relevant to industry regulation and to
                                                clarify the application of certain provisions.

                                                                                Clause Notes

                                                                       PART 1--PRELIMINARY
                                                Clause 1    sets out the main purposes of the Act, which are to make
                                                            amendments to the Electricity Industry Act 2000, the Gas
                                                            Industry Act 2001, the Electricity Industry (Residual
                                                            Provisions) Act 1993 and the Electricity Safety Act 1998.
                                                            Paragraph (a) provides that the purpose of amending the
                                                            Electricity Industry Act 2000 is to replace the existing
                                                            Victorian electricity supply industry Tariff Order with a more
                                                            limited Order, to clarify when a generation company is liable to
                                                            be rated in respect of land used for generation functions and to
                                                            improve generally the operation of that Act.
                                                            Paragraph (b) provides that the purpose of amending the Gas
                                                            Industry Act 2001 is to replace the Victorian gas industry Tariff
                                                            Order with a more limited Order, to repeal certain provisions
                                                            regulating significant producers of gas and to improve generally
                                                            the operation of that Act.
                                                            Paragraph (c) provides that the purpose of amending the
                                                            Electricity Industry (Residual Provisions) Act 1993 is in
                                                            relation to the regulation of charges for electricity purchased
                                                            under the National Electricity Code.


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                                                551165                                          BILL LA CIRCULATION 22/4/2004

 


 

Paragraph (d) provides that the purpose of amending the Electricity Safety Act 1998 is in relation to electricity safety management schemes. Clause 2 provides for the commencement of the Act. Victorian Legislation Parliamentary Documents Sub-section (1) provides for commencement of all sections of the Act on the day after Royal Assent, with the exception of those sections of the Act providing for the replacement of the electricity industry Tariff Order and the gas industry Tariff Order and those (associated) sections providing for the repeal of clause 6 of Schedule 4 to the Electricity Industry (Residual Provisions) Act 1993 and clause 11(1) of Schedule 5 to the Gas Industry (Residual Provisions) Act 1994. Sub-section (2) allows for commencement by proclamation of those sections of the Act providing for the replacement of the electricity industry Tariff Order and the gas industry Tariff Order and those sections providing for the repeal of clause 6 of Schedule 4 to the Electricity Industry (Residual Provisions) Act 1993 and clause 11(1) of Schedule 5 to the Gas Industry (Residual Provisions) Act 1994, to allow for coordination between the repeal of the existing Tariff Orders and implementation of the replacement Orders. Sub-section (3) provides that if a provision referred to in sub- section (2) does not come into operation before 30 June 2005, then it will come into operation on that date. PART 2--AMENDMENTS TO ELECTRICITY INDUSTRY ACT 2000 Clause 3 substitutes the current definition of "Tariff Order" in the Electricity Industry Act 2000 with a new definition, to refer to the replacement Order made under section 15A as amended and in force from time to time. The existing Tariff Order is to be revoked. Clause 4 provides for the repeal of the provision continuing the current electricity industry Tariff Order and for consequential amendments to the Electricity Industry Act 2000. The Tariff Order regulated charges for electricity transmission, distribution and retail services during the reform of Victoria's electricity supply industry and prior to the introduction of retail competition. Most provisions of the Order have expired. Sub-section (2) provides that section 14 of the Electricity Industry Act 2000 is repealed. Section 14 of the Electricity Industry Act 2000 grants to the Governor in Council the power 2

 


 

to revoke the existing electricity industry Tariff Order and to make specified amendments to that Order, by further Order published in the Government Gazette. Sub-sections (1) and (3) to (5) make consequential amendments Victorian Legislation Parliamentary Documents to Electricity Industry Act 2000 resulting from the repeal of section 14. Clause 5 inserts a new section 15A providing for the making of a replacement electricity industry Tariff Order, in respect of specified matters, being those limited matters still regulated by the current electricity industry Tariff Order. Sub-section (1) provides that the Governor in Council may, by Order published in the Government Gazette, specify pricing principles the Essential Services Commission must apply in making a determination under the Essential Services Commission Act 2001 in respect of charges for connection to and use of the distribution system, determine or authorise the Essential Services Commission to determine, having regard to specified criteria, those distribution services which are excluded distribution services and make provision for any matter ancillary to those matters. Sub-section (2) provides that the Governor in Council may amend or revoke the Order by further Order published in the Government Gazette. Clause 6 deletes the phrase "suspended or" from section 27(5)(a) of the Electricity Industry Act 2000 so that the supplier of last resort obligation commences when a licensee's licence is revoked or the right of a licensee to acquire electricity from the wholesale electricity market is suspended or terminated, whichever first occurs. Clause 7 repeals sections 41 to 44 and section 46(1) of the Electricity Industry Act 2000, authorising the Governor in Council to make certain Orders in respect of the implementation of retail competition, for example, rules in respect of customer transfer processes. These matters are now governed by other instruments (both at a national and State level). Clause 8 inserts new sections 45(3) and 46(5) providing that sections 45 and 46 of the Electricity Industry Act 2000 cease to have effect on 31 December 2005. These provisions provide for the Governor in Council to by Order published in the Government Gazette provide for the regulation and recovery of charges for the implementation of retail competition. 3

 


 

Clause 9 inserts new section 94(8A) of the Electricity Industry Act 2000, specifying that a generation company is deemed for the purposes of section 94 to be liable to pay rates in respect of land used for generation functions if the generation company is liable to pay rates in respect of the land under the Local Government Act Victorian Legislation Parliamentary Documents 1989 or the generation company is liable to pay rates in respect of the land under an agreement with the person who is liable to pay rates in respect of the land under the Local Government Act 1989. Section 94 of the Electricity Industry Act 2000 provides for a council and a generation company that is liable to pay rates in respect of land used for generation functions, to negotiate payment in lieu of rates. The amendment is intended to ensure that generation companies who do not own land used for generation functions, but lease or license land, may have the benefit of section 94. PART 3--AMENDMENTS TO GAS INDUSTRY ACT 2001 Clause 10 substitutes paragraph (a) of the current definition of "Tariff Order" in the Gas Industry Act 2001 with a new definition, to refer to the replacement Order made under section 20A as amended and in force from time to time. Clause 11 substitutes the phrase "a Tariff Order" in section 20 of the Gas Industry Act 2001, with the phrase "Wimmera and Colac Gas Supply Tariff Order." Sub-section (4) inserts new section 20(10) of the Gas Industry Act 2001 to define "Wimmera and Colac Gas Supply Tariff Order" as the Wimmera and Colac Gas Supply Tariff Order 1998 published in the Government Gazette 17 December 1998 as that Order is amended and in force from time to time. While the Victorian gas industry Tariff Order will be revoked, the Wimmera and Colac Gas Supply Tariff Order, regulating tariffs for certain customers in Ararat, Colac, Horsham and Stawell, will continue in accordance with its terms. Clause 12 inserts a new section 20A into the Gas Industry Act 2001 providing for the making of a replacement gas industry Tariff Order, in respect of specified matters. The Victorian gas industry Tariff Order, which regulated charges for gas transmission, distribution and retail services during reform of the Victorian gas market and in the transition to retail competition, will be revoked. Those provisions of the Tariff Order which have not expired will be continued in this replacement Order. 4

 


 

Sub-section (1) provides that the Governor in Council may by Order published in the Government Gazette, determine or authorise the ACCC to determine, having regard to specified criteria, those transmission services which are excluded transmission services and to regulate the terms and charges for Victorian Legislation Parliamentary Documents the provision of those services; specify pricing principles to apply to any determination of the ACCC in relation to charges for connection to and use of a transmission pipeline; determine or authorise the Essential Services Commission to determine, having regard to specified criteria, those distribution services which are excluded distribution services and to regulate the terms and charges for the provision of those services; specify pricing principles to apply to any determination of the Essential Services Commission in relation to charges for connection to and use of a distribution pipeline and make provision for any matter ancillary to these matters. Sub-section (2) provides that if any term of the replacement Order referred to in subsection (1) is inconsistent with the National Gas Access Code or an access arrangement approved under the National Gas Access Code, the provisions do not apply to the extent of the inconsistency. Sub-section (3) provides that the Governor in Council may amend or revoke such Order by Order published in the Government Gazette. Clause 13 repeals section 33 of the Gas Industry Act 2001, providing for the Essential Services Commission to determine standards in relation to reliability of supply of gas to classes of customers in accordance with recommendations made to the Commission by VENCorp. Other regulatory provisions now promote the reliability of Victorian gas supply. Clause 14 substitutes paragraphs (a) and (b) of section 34(5) of the Gas Industry Act 2001 so that the supplier of last resort obligation commences when a licensee's licence is revoked (rather than where a licence is suspended or revoked) or a licensee has been deregistered as a market participant in the category of retailer under the MSO Rules, whichever first occurs. This amendment ensures that the supplier of last resort obligation is not technically triggered when a gas market participant has breached the MSO Rules but is able to and does remedy that breach. 5

 


 

Clause 15 repeals section 37 of the Gas Industry Act 2001, which placed restrictions on the retail sale of gas by significant producers. Both section 37 and Part 5 of the Gas Industry Act 2001 (commonly called the "significant producer provisions") are to be repealed, given developments in the upstream gas market in Victorian Legislation Parliamentary Documents Victoria, including the improvement to competitive alternatives available to Victorian gas retailers and consumers. Clause 16 inserts new section 68(6) of the Gas Industry Act 2001, providing that the section ceases to have effect on 31 December 2007. Section 68 provides for the Governor-in-Council to by Order published in the Government Gazette provide for the regulation and recovery of charges for the implementation of retail competition. Clause 17 repeals Part 5 of the Gas Industry Act 2001, which prohibited a significant producer from engaging in anti-competitive conduct. The Trade Practices Act 1974 (Cth) prohibits anti-competitive conduct by corporations, including significant producers. Clause 18 substitutes sections 128(2)(a) and 128(3)(b) in the Gas Industry Act 2001, to remove references to section 37 of the Gas Industry Act 2001. Clause 19 repeals section 160(1)(i) of the Gas Industry Act 2001, requiring VENCorp to recommend to the Essential Services Commission standards in relation to the reliability of the supply of gas to classes of customers, for the purpose of section 33 of the Gas Industry Act 2001. Section 33 is to be repealed by clause 13. PART 4--AMENDMENTS TO THE ELECTRICITY INDUSTRY (RESIDUAL PROVISIONS) ACT 1993 Clause 20 inserts new section 158BA(1A) of the Electricity Industry (Residual Provisions) Act 1993, to provide that the Governor in Council may, by Order published in the Government Gazette, authorise the Treasurer to specify an amount for the purposes of the smelter reduction amount calculations specified in clauses 3.3 and 4.3 of schedule 9A.2 of the National Electricity Code. Clause 21 repeals Clause 6 of Schedule 4 to the Electricity Industry (Residual Provisions) Act 1993, setting out certain transitional matters in respect of the Victorian electricity supply industry Tariff Order, now no longer necessary. 6

 


 

PART 5--AMENDMENTS TO THE ELECTRICITY SAFETY ACT 1998 Clause 22 substitutes section 111(1)(a) of the Electricity Safety Act 1998 with new sections 111(1)(a) and (ab). Victorian Legislation Parliamentary Documents Sections 111(1)(a) and (ab) together provide that the Office of the Chief Electrical Inspector must recommend that an electricity safety management scheme be approved if the scheme complies with section 107(2) of the Act and the regulations relating to electricity safety management schemes and the level of safety to be provided by the scheme is not less than the level of safety which is required to be provided by the Act and regulations. Sub-section (2) deletes section 113(3) of the Electricity Safety Act 1998 so that the Office of the Chief Electricity Inspector may issue an exemption from compliance with regulations, following approval of an electricity safety management scheme, without further need to assess the level of safety provided by the scheme. Clause 23 substitutes the reference in section 87(5)(e) of the Electricity Safety Act 1998 to the "Department of Natural Resources and Environment" with the "Department of Sustainability and Environment." PART 6--AMENDMENTS TO OTHER ACTS Clause 24 repeals clause 11(1) of Schedule 5 to the Gas Industry (Residual Provisions) Act 1994, setting out certain transitional matters in respect of the Victorian gas supply industry Tariff Order, now no longer necessary. Clause 25 inserts new section 2(1A) to the Federal Courts (Consequential Amendments) Act 2000 to confirm that sections 22 and 23 came into operation on 8 March 2004. Sections 22 and 23 of the Federal Courts (Consequential Amendments) Act 2000 were proclaimed by the Governor in Council to commence on 8 March 2004. New section 2(1A) is required to confirm this commencement, given a typographical error in the Act title in the proclamation document. 7

 


 

 


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